Tilray (NASDAQ: TLRY) stock has dropped over 34% in market value from May 2021, soon after the merger with Aphria went through. Shares of the Canadian cannabis giant are currently trading at $10.80, valuing the company at a market cap of $5 billion. Let’s see if Tilray is poised to outpace the broader markets going forward or if it will continue to disappoint investors.
Tilray has lofty ambitions
Tilray has made it clear that it wants to hit $4 billion in revenue by the middle of calendar year 2024. Considering that its revenue for Q1 of fiscal 2022, ended August 31, 2021 was just $168 million, it could seem like a tall task.
The company has brought in Blair MacNeil from Bacardi to expand its presence across Canada and aim for a 30% market share by the end of fiscal 2024. During the Q1 2022 earnings call, Tilray said that it has a 16% share in the Canadian retail market.
However, expanding its market only in Canada might not be enough to hit the $4 billion target. Tilray has been making inroads south of its border, anticipating federal legalization of marijuana in the U.S. It acquired the majority of MedMen's senior secured convertible note, giving Tilray the option to buy a large equity stake in the former. MedMen has around 25 retail locations in the U.S., including major markets like Los Angeles and Las Vegas.
Back home in Canada, the number of open stores after the lockdown has doubled from 600 to 1,200 at the end of August 2021 which will be a key driver of top-line growth for Tilray and peers.
Europe and other markets
On October 26, Tilray announced that it was selected by the Luxembourg Ministry of Health as a supplier of Good Manufacturing Practice (GMP) certified medical cannabis products for the country’s medical cannabis program. Now, Tilray can supply its cannabis products to qualifying patients with “varying medical conditions”. These products will be administered under the supervision of physicians.
Tilray’s expansion is also based on “two strong medical cannabis brands, large distribution network in Germany through CC Pharma with access to 13,000-plus pharmacies and end-to-end European Union GMP supply chain.” The company also has a high-quality production facility in Portugal, and a new cultivation and production facility in Germany, which announced its first harvest in July 2021.
Tilray said that the EU, including Germany, Poland, Italy, the UK, France, the Netherlands, and Israel has the potential to be a multi-billion-dollar market. Outside Europe, Tilray said Australia and New Zealand continue to perform well and it sees additional opportunities in Argentina, Colombia, Brazil, China and India.
Tilray will have to focus on acquisitions
In Canada, thanks to the lockdown, a lot of retail stores were shut until mid-June. When you take that into account, it might not be a misjudgment to say that Tilray could have clocked revenues closer to $225 million - $250 million. However, that brings its annual revenue estimate to $1 billion.
This means the company will have to go down the inorganic path to hit its $4 billion revenue goal. It is highly likely that Tilray will start eyeing acquisitions in its home market first. According to multiple accounts, the Canadian marijuana market doesn’t seem to be large enough for all the companies that sprung up in the last decade. Investors should expect a lot of consolidation to take place, and Tilray, with its massive size, could end up merging quite a few companies into its fold. Its large size gives it better and easier access to capital than its peers.
Tilray is a company that has the cash and the experience to withstand tough markets, making it one of the safest bets among Canadian cannabis stocks.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
